A Guide to the Royalties Battle Between Streaming Services and Songwriters

One side gave birth to headlines that were literally untrue. The other side was accused of engaging in “fake news.” All this for a 119-page, footnote-packed ruling by a little-known panel of federal judges? Welcome to the no-holds-barred legal battle currently pitting trade groups for songwriters and music publishers against the major streaming services.

The drama heated up in January 2018, when the U.S. Copyright Royalty Board decided to boost the royalty rate that Spotify, Apple Music, and similar streamers must pay songwriters and publishers. Flash forward to last week, when Spotify, Google, Pandora, and Amazon revealed they were eachplanningto appeal that ruling. The National Music Publishers Association (NMPA) blasted the move, claiming that Spotify and Amazon had chosen to “sue songwriters.” Perhaps fueled by this incendiary wording—which a NMPA spokesperson tells Pitchfork is “shorthand for the technical legal process of them appealing”—backlash against the streaming services quickly spread among songwriters and industry figures. This week, Spotify responded to the criticism with a blog post noting the complexity of the situation.

Music publishing companies, meanwhile, maintain that the situation is quite simple: The CRB raised songwriters’ pay, and Spotify opposes it. But the legal ruling itself—stuffed with such pithy phrases as, “Several direct licenses between [REDACTED] and music publishers base royalties on a straight, uncapped 70 percentage of TCC, with no ‘greater-of’ prong”—certainly seems pretty complicated. We put together a non-legalese rundown of what’s happening in Big Tech’s battle with songwriters and publishers.

Why This Ruling Happened

The CRB is a panel of three federal judges appointed by the Library of Congress. Under U.S. law, these judges meet regularly to set the rates for mechanical royalties, the type paid to songwriters and their publishers when their songs are sold or streamed. In a 2017 legal proceeding, the CRB heard the Nashville Songwriters Association International and the NMPA make a joint case against Apple, Spotify, Amazon, Pandora, and Google. Though one judge dissented, the CRB ultimately reached its decision to raise rates, over a five-year period, from 10.5 percent to 15.1 percent—reportedly the biggest single increase the CRB has made since it was created by Congress in the mid-2000s. “In this market, with the evidence before them, the Judges have attempted to establish royalty rates and terms that compensate songwriters and music publishers and offer to licensees appropriate returns and incentives for continued development,” Judges Suzanne Barnett and Jesse Feder wrote.

Who’s Fighting It

Spotify, Google, Pandora, and Amazon have all signaled their plans to appeal. The first three companies said in a joint statement that the CRB increased royalty rates “in a manner that raises serious procedural and substantive concerns.” If left intact, they claimed, the decision would hurt both streaming services and songwriters.

Where Apple Stands

Apple is not taking part in the appeals. As such, the NMPA and other industry figures were quick to praise Apple as pro-artist. That said, if the appeals succeed, Apple could conceivably have its cake and eat it too, enjoying the benefit of lower rates without the ire of coming out in favor of them. Apple’s vast phone business and huge cash reserves also mean it’s more insulated from higher costs of doing business than Spotify would be.

How Songwriters and Publishers Responded

“Instead of accepting the CRB’s decision, which still values songs less than their fair market value, Spotify and Amazon have declared war on the songwriting community by appealing that decision,” NMPA head David Israelite said in a statement. “No amount of insincere and hollow public relations gestures such as throwing parties or buying billboards of congratulations or naming songwriters ‘geniuses’ can hide the fact that these big tech bullies do not respect or value the songwriters who make their businesses possible.” Bart Herbison of the NSIA added, “You cannot feed a family when you earn hundreds of dollars for millions of streams.”

Individual songwriters also reacted with outrage. “This is WRONG,” wrote Amber Coffman, the singer-songwriter and former Dirty Projectors member. Pop hitmaker Justin Tranter wrote that without “songs these tech companies have nothing to stream/sell. Shameful.” “Spotify please do what’s right and drop your appeal,” wrote hip-hop producer and songwriter Frank Dukes.

Why Spotify Says It’s Appealing the Decision

Spotify in essence claims that all sides want more money for songwriters—they just disagree on how to get there. “The CRB rate structure is complex and there were significant flaws in how it was set,” the company said in its blog post. “A key area of focus in our appeal will be the fact that the CRB’s decision makes it very difficult for music services to offer ‘bundles’ of music and non-music offerings. This will hurt consumers who will lose access to them. These bundles are key to attracting first-time music subscribers so we can keep growing the revenue pie for everyone.” (Spotify didn’t elaborate on what it meant by bundles, but just today it announced a discounted streaming bundle that offers free Hulu with a Spotify Premium subscription.)

Spotify also must negotiate a separate set of royalty rates with record labels, another consideration implied in its blog post: “The CRB judges set the new publishing rates by assuming that record labels would react by reducing their licensing rates, but their assumption is incorrect.”

Why the Appeals Aren’t Surprising

“On some level this is expected,” the artists’ advocacy nonprofit Future of Music Coalition noted. “The CRB process by which rates are decided has an inherently adversarial dynamic. At the same time, many listeners and artists don’t know that some services routinely, quietly lobby to pay artists less.”

How Streaming Services and Songwriters Could Get Along

The CRB fight comes on the heels of a sweeping new music copyright law, the Music Modernization Act—a rare instance when all sides of the music business found a way to cooperate. Maybe there’s a way for Big Tech and shoestring tunesmiths to reconcile their differences in this case, too. “The issue is so complex because both sides are right: songwriters need to be paid more, and streaming services need to increase [profit] margin,” writes Mark Mulligan, the managing director of boutique media and technology analysis firm MIDiA Research. His recommendation: Raise streaming prices.

Netflix, Mulligan notes, has always managed to raise its prices to stay ahead of inflation. Spotify hasn’t. It can’t, and its rivals can’t, because they don’t have Netflix-like exclusive content—listeners could just flock toward the cheapest streaming service. And yet Spotify, the streaming service with the most paid subscribers in an incredibly competitive space, still has only once turned a quarterly operating profit. The music streaming business hasn’t yet found a way to consistently land in the black. Charging more than $10/month for a streaming subscription could certainly help, assuming the rest of the music industry is open to the idea. If listeners actually want songwriters to get paid more, they need to be part of the solution.